ITR Filing For Self-Employed: From Reporting Income To Choosing Right Form — Essential Guide To Avoid Errors
Self-employed taxpayers need to be more careful while adding up all their income, including that from interest, dividends on shares and gains from the sale of equities/properties.
The Income Tax Department has extended the deadline to file tax returns for the assessment year 2025-26. The taxpayers, who don’t need their accounts to be audited, can now file the Income Tax Return till Sept. 15, 2025, which was July 31 earlier.
For self-employed individuals with a taxable income, it’s important to carefully gather all documents and information before filing the ITR. As the self-employed taxpayers often receive income from multiple clients, projects or assignments, it’s common to miss any relevant information while filing ITR.
Any omission of income or wrong reporting during ITR filing could lead to a notice from the Income Tax Department and even a fine or penalties. So, it’s important to avoid the ITR filing errors for a quick verification and refunds, if any.
Mistakes To Avoid While Filing ITR
Choosing Wrong Form
For self-employed taxpayers, there is a separate ITR form. The individuals with profits and gains from business or profession can choose to file ITR-3 or ITR-4, as applicable.
ITR-4 can be used by those who opt for presumptive income under Section 44ADA, 44AD, or 44AE of the Income Tax Act, 1961. Form ITR-3 is meant to be used by taxpayers who maintain proper books of accounts.
Reporting Income From All Sources
Self-employed taxpayers need to be more careful while adding up all their income, including that from interest, dividends on shares and gains from the sale of equities/properties, as their income can vary from year to year.
Income from all clients, projects and assignments should be reported properly without missing anything.
Expenses As Deductions
Self-employed taxpayers can claim certain expenses as deductions. These expenses should pertain to their business or profession. This includes renting a space for an office, eating out as part of client meetings, travelling costs and depreciation of computers and other equipment.
Taxpayers should keep track of all their expenses to reduce their taxable income.
Tax Regime
Unlike salaried employees, people with income from business or profession cannot switch between the old and new tax regime every year. They only get one chance to change their tax regime.
Taxpayers need to file Form 10-IEA before the deadline to retain the old tax regime. It is to be noted that the new tax regime is the default regime and it comes with lesser deductions but more concessional slabs.
The old regime offers more deductions but comes with higher tax rates. Taxpayers need to take stock of which regime is better for them before making a switch, as their decision cannot be changed later.
TDS Claim
The tax deducted at source is subtracted from the client payments that businesses or professionals receive. The TDS can be claimed at the time of filing the tax return. Don’t miss claiming the TDS while filing your ITR.
By keeping track of these factors, taxpayers can avoid some major red flags while filing ITR.
